Anonymous
Anonymous asked in Social ScienceEconomics · 1 month ago

HICKSIAN DEMAND MC?

Suppose regular demand for x, when Px = 2, is 8. When Px increases to 4, the consumer buys 4 units of x. When this consumer is "compensated" for the increase in price, they would would buy 3 units of x.

   

A. The substitution effect is -3 units of x. The income effect is -2 units of x.

   

B. There is something wrong with this question: substitution effects are moving in the wrong direction.

   

C. There is something wrong with this question: income effects are moving in the wrong direction.

   

D. There is nothing wrong with this question. This is an inferior good.

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